Tag Archives: digital maturity

Seeing Through Digital Glasses

Extraordinary change is taking place throughout the insurance industry and everything that surrounds it. The whole world is going digital. It’s the new reality, and there is no getting around it. But just the word or even the idea of digital has many people, insurers included, pondering the basic and fundamental questions: Why do we need to be digital? How do we go digital? And what, exactly, is digital anyway? To get a visual of what digital means for insurance, look through the lens of digital transformation.

Defining Digital

Defining digital is important because it is a very broad topic with far-reaching implications. Simply put (and without getting into the science behind it), digital is a way of doing things. And becoming digital is a state that will be required for moving around in the digital world: communicating, shopping, traveling, doing business, keeping a competitive edge and much, much more.

See also: Future of Digital Transformation  

Going Digital

Digital is such a broad concept that it is easy to get too narrowly focused on just one part of the everything that makes up digital. For example, digital is a format for storing assets of many kinds; it is a way of transmitting data and information from one place to another, and it is a way of interacting with data. But that’s not all. The digitization of assets is just the first phase or step on a pathway that will lead to the next phase of digital: creating the digital experience.

The experiential phase of digital begins when digital assets come into use. Now digital becomes the method that undergirds the interaction. Digital assets are transmitted digitally to create digital experiences via portals, mobile apps, websites, sensors, wearables and many other digital things.

In the third phase, digital transformation, digital presence and capabilities go beyond to an expanded and progressive digital experience that touches everything, connects the parts, resets the expectations, broadens the horizons and transforms the lives of everyone it touches.

Being Digital

For insurers, the journey of digital transformation will involve rethinking an insurer’s value proposition and internal business operations, embracing data and advanced analytics, creating and supporting all means of engagement and automation across all the company and delivering enriched customer solutions that are thoroughly integrated with internal operations as a seamless, personalized experience from start to finish and everywhere in between.

Digital is the thread that will connect and unite all systems, processes and strategic initiatives and tie them together into an enterprise that is ready for the future. And digital transformation is the strategic initiative that will set the foundation, set the context and set the direction for the next-generation insurance company.

See also: Digital Transformation: How the CEO Thinks  

In our new report, Digital Transformation in Insurance: Discovering the Pathway to Digital Maturity, SMA introduces its Digital Maturity Model, a model for developing a digital strategy that will be fundamental to success in the digital world, both today and tomorrow.  Click here for a copy.

Do You Really Have a Digital Strategy?

Almost all insurers have started digital projects, many have digital teams, but only a few have a true digital insurance strategy.

To develop a coherent strategy for digital insurance, first an insurer must decide what the term means. There is a distinction between insurance digitalization and true digital business. Digitalization consists of taking existing processes, procedures and services and using technology to improve efficiency and effectiveness. Fundamentally, digitalization takes what an insurer is doing already, and applies digital. In this circumstance, there is no real transformation of the business. Digitalization is critical in a price-sensitive, highly competitive industry, but it is not enough to distinguish an insurer from the competition. In the context of insurance, true digital business requires the application of technology to offer new business value or move the insurer to a new position in the market. In many markets, the form this new digital business will assume has yet to be determined.

See also: Maturing Use of Mobile in Insurance  

Many different methods exist to evaluate digital business maturity. I prefer a five-level model, based on methodologies used by industry analysts and other experts.

  1. The first level is digitalization, taking existing processes and applying technology. Many insurers began this process in the late 1990s or early 2000s, and, unfortunately, many have stayed there. Insurers initially saw large efficiency benefits in moving internal processes away from paper over to digital, but those returns rapidly drop off after an insurer migrates the highest-priority processes. An example of this stage is offering PDF copies of insurance documents on a customer portal.
  2. The second level is to create new digital experiences, using the capabilities of digital platforms. An example is creating mobile applications for agents to improve interactions with the company, using geolocation to offer nearby preferred vendors and other options.
  3. Level three is offering new insurance programs that would not be possible without digital technologies. One example is a company creating a travel insurance product in partnershipl with a travel mobile application and offering that product at the time a customer purchases a flight.
  4. Level four is an evolution of stage three, and consists of embedding digital throughout the enterprise. An insurer thinks of all aspects of the business in terms of digital, even in departments such as compliance and daily operations. An insurer knows that it has progressed to this stage when even traditional analog functions such as the mailroom evaluate all processes with digital transformation in mind.
  5. At level five, an insurer has repositioned to a new competitive space inside the insurance market. We are only now beginning to see a few stage five insurers, and these insurers are often born digital. An example is new peer-to-peer insurance models that have begun to gain acceptance in recent years, like crop insurance in Africa. This insurance is paid for by a surcharge on farming inputs such as fertilizer and seeds. Claims are automatically initiated when weather stations recognize severe weather events. This is a form of protection that could only exist in a digital world.

See also: 5 Accelerating Trends in Digital Marketing  

The first step toward transforming into a digital insurer requires evaluating where your company is on this continuum, and where you need to be in the next three to five years. What amount of disruption can your business model sustain? What steps can you take now to build the skills and culture you need to compete in the face of this disruption?

Crop insurance in Africa may be a small part of the overall insurance market, but consider what could happen if a major agricultural market such as the U.S. began this same transition. All insurers today have digital processes and procedures, but relatively few have progressed past levels two or three on this digital continuum. Eventually all insurers will be digital insurers, but this transformation will move in fits and starts, with the leaders gradually pulling out ahead of the laggards and gaining a lasting competitive advantage.

The Future of Insurance [Infographic]

With the Internet playing an increasingly important role in business operations across all sectors, companies now realize they need to adapt to the digital sphere to maximize their earning potential and customer reach. Research shows that businesses that embrace digital adoption see a five times greater impact on growth than those who resist going digital.

In comparison with others, the insurance industry has been quite slow in using digital channels as a core part of business operations. 79% of insurers say they are still learning about digital, while more than half of insurance companies do not have operating models that can incorporate digital. This is extraordinary in an era where online operation is not a bonus but a prerequisite to become an industry leader.

More than half of the world’s population spends time online every single day, indicating that customers want to be able to interact with companies through digital channels. A business that gets its digital operations right will deliver on customer expectations and retain those customers, who, in turn, will speak in a positive light about the brand. This word-of-mouth marketing is highly likely to result in more customers. It’s high time that insurers realize this and take action to allow for their customers to interact with them online.

The infographic below, which was created by Top Quote, outlines the digital challenges faced by the insurance industry and what insurers can do to address these challenges.